Does anyone know how the combat resolution system works in RTW? Perhaps in the strategy guide?
What do you mean by combat resolution system? When you win, I think the enemy army just disintegrate or retreats whatever they have left. I can't tell for sure about vanishing, since I've only seen a portion of the vast map. Most likely they just retreat.

When you assault a settlement you have a choice to
a) Occupy - No looting but citizens will be grumpy
b) Enslaved - Citizens will be dispersed among existing settlements but there will be looting ( and some buildings maybe destroyed).
c) Exterminate - Kill a lot of citizens. You get a lot of denari.